CORDILLERA CAREER DEVELOPMENT COLLEGE

TAXATION LAW 2

ACADEMIC YEAR 2019-2020

FINAL EXAMINATION

INSTRUCTIONS

1. Read each question very carefully. Each question is

equivalent to 5 points.

2. Answer the Essay questions legibly, clearly, and

concisely. Submit your answers through email-
[email protected] on or before 7 o’clock in the evening
today.

I.

Upon due investigation, the tax official was able to determine

that X has under declared his income by more than 50%. (A)
what kind of penalty is imposable against X? (B) May the
government collect deficiency interest and delinquency
interest at the same time?

II.

Under Article One, Chapter 2, Title One, Book II of the Local

Government Code, on Local Taxation and Fiscal Matters, the
provinces were vested with the power to levy the following
taxes:
(1) Tax on Transfer of Real Property Ownership;
(2) Tax on Business of Printing and Publication;
(3) Franchise Tax;
(4) Tax on Sand, Gravel, and Other Quarry Resources;
(5) Professional Tax;
(6) Amusement Tax; and
(7)Annual Fixed Tax For Every Delivery Truck or Van of
Manufacturers or Producers, Wholesalers of, Dealers, or
Retailers in, Certain Products.

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(A) May provinces levy taxes, fees and charges outside of
those enumerated in the aforementioned Article One, Chapter 2,
Title One, Book II of the Local Government Code?

(B) In terms of geographical area, the provinces are usually

the largest of all local government units. Do they also have
the broadest taxing powers?

III.

ABC Realty Corp. (ABC) is a domestic corporation engaged in

rental business since 2009. For taxable 2014, the Final
Adjustment Return of ABC shows an overpayment of income tax.
ABC opted to carry over the overpaid income tax. In the
succeeding years 2015 and 2016, ABC had no tax payable, as a
consequence of which it was unable to utilize its 2014
overpaid income tax as a tax credit. In 2017, ABC applied for
cash refund of the amount but the Commissioner of Internal
Revenue (CIR) denied the claim for the reason that the claim
had already prescribed.

Did the CIR act correctly? Explain.

IV.

In his lifetime, Mr. A, already old and suffering from

incurable disease, donated to his son a house and lot where
they both principally reside. Mr. A died shortly after making
the donation. The house and lot, the only remaining property
of Mr. A, was valued Php1 million at the time of his death. A
BIR official opined that the house and lot should have been
reported in the estate tax return for the reason that it was
transferred in contemplation of death.

(A) Is the theory of the BIR official legally tenable?

(B) Suppose the heir of Mr. A fails to timely object to the

inclusion of the house and lot in gross estate, do you think
the estate of Mr. A is liable for the payment of estate tax?

V.

Sen Po Ek Marketing Corp. (Sen Po Ek) was assessed by the BIR

for various deficiency taxes. Sen Po Ek timely protested the
assessment. Due to its failure to pay the amount claimed by

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the BIR, Sen Po Ek subsequently received notices of distraint
and levy of its properties. Without awaiting the formal
decision on its protest, Sen Po Ek immediately appealed before
the CTA and petitioned the court to issue a writ of
injunction, claiming that the collection processes begun by
the BIR are in plain violation of the law. It argued that the
amount assessed against it are four times greater than its net
worth. It thus asked the court to dispense with the
requirement of depositing the money claimed by the BIR or the
posting of a surety bond.

(A) Did Sen Po Ek act correctly in immediately filing an

appeal with the CTA without the formal decision by the BIR on
its protest?

(B) Does the CTA have the discretion of dispensing with the
deposit of the amount claimed by the BIR or the posting of a
surety bond as a condition for issuing a writ of injunction?

VI.

Mang Gerry opened a small cafeteria in Diliman, Quezon City.

His suppliers and customers are all local residents of
Diliman, Quezon City. Since he registered with the BIR as a
VATtaxpayer, Mang Gerry filed a VAT return wherein he applied
a transitional input tax credit. However, after one year of
operations, Mang Gerry had an unutilized transitional input
tax credit.

May Mang Gerry successfully ask for the refund or issuance of

a tax credit certificate for his unutilized transitional input
taxes? If so, before what office should he file his claim and
within what period?

VII.

The BIR issued against ABC Corp. a Preliminary Assessment

Notice (PAN) with an attached Summary Report which stated the
facts and the laws in support of the assessment. ABC Corp.
ignored the PAN drawing the BIR to issue a Final Assessment
Notice (FAN). The FAN was silent as to the factual and legal
bases of the assessment. ABC Corp. protested the assessment
alleging that it was void for failure to state the factual and
legal bases. However, the Commissioner of Internal Revenue
failed to take action over the protest. ABC Corp. likewise
made no move as a result of the Commissioner’s inaction. Six
years later, the BIR sent to ABC Corp. a letter reiterating

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its previous assessment. The letter alleged that the
assessment had become final and executory for failure of ABC
Corp. to appeal the inaction before the CTA.

(A) Procedurally, may ABC still appeal the case to the CTA?
Explain

(B) On the substantive aspect, did the BIR assessment comply

with the requirements of the law?

VIII.

A certain taxpayer received from a BIR Regional Director (RD)

an assessment for alleged deficiencies in the withholding of
taxes. Claiming exemption, the taxpayer timely filed a protest
addressed to the RD. After the lapse of 180 days, the taxpayer
forthwith elevated its protest to the Commissioner of Internal
Revenue (CIR), there being no action taken by the RD. As the
CIR also failed to decide on the protest within 180 days, the
taxpayer filed within 30 days thereafter an appeal before the
Court of Tax Appeals (CTA).

Did the CTA acquire jurisdiction over the appeal?

IX.

(A) In disputed assessment cases, does the filing of an appeal

with the CTA have the effect of suspending the collection of
taxes?

(B) What is the underlying reason for the prohibition of the

use of an injunction to stay the collection of any internal
revenue tax?

X.

A municipal ordinance seeks to impose a tax on all kinds of

transmissions of real property located within the territorial
jurisdiction of the municipality. It appears that a tax
ordinance of the province where the said municipality is
located already provides for a similar transfer tax.

If you were to question the validity of the municipal

ordinance, what ground(s) are you going to raise? Before what
office would you file your complaint or protest?

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 XI.

In 2001, Ironworks Builders, Inc. (Ironworks) rendered

construction services to Philippine Air Terminal Co., Inc.
(PIATCO), a PEZA-registered entity. On April 11, 2002,
Ironworks filed with the BIR an administrative claim for
refund of excess creditable input VAT attributable to zero-
rated sales to PIATCO for all four quarters of 2001. Due to
inaction by the BIR, Ironworks filed a judicial claim with the
CTA on March 10, 2003. During trial, Ironworks presented sales
invoices to prove its zero-rated sale of services to PIATCO.
The words “zero-rated” are, however, not stated in the sales
invoices.

(A) Based on the facts stated above, did the CTA acquire
jurisdiction over the judicial claim?

(B) Are Ironworks’ evidence, consisting of sales invoices,

sufficient to support its claim for refund of excess input VAT
for taxable year 2001? Cite at least two reasons.

******** nothing follows! ********

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